Convening in Marshall, the committee’s task is evaluating “the investment practices of financial services firms and how those practices affect the state’s public pensions.”
Officials with portfolio-managing firms BlackRock and State Street will be present at the hearing along with Institutional Shareholder Services (ISS), the proxy vote advising firm for some of Texas’ state pension systems. Vanguard, another of the largest asset managers in the country, was excused by Committee Chairman Bryan Hughes (R-Mineola) on Wednesday after the company withdrew itself from the Net Zero Asset Managers initiative.
BlackRock specifically was subpoenaed by the committee for ESG-related documents.
It’s the latest chapter in Texas Republicans’ growing rebuke of the ESG movement and its attempt to guide capital toward companies that toe the line on certain causes. Primarily, ESG is synonymous with progressive priorities on environmental and energy policy along with various social causes.
For example, BlackRock — which has been the most public face of the fight — touts its commitment to a “decarbonized” energy future while stating it is not “divesting” or “sanctioning” fossil fuel companies. As the world’s largest portfolio manager, BlackRock controls or influences the movement of trillions of dollars in investments.
Texas Attorney General Ken Paxton is among 19 state attorneys general investigating BlackRock for its ESG-related statements. Last session, the Texas Legislature passed Senate Bill (SB) 13, which requires the Comptroller of Public Accounts to remove state pension investments from companies deemed to be discriminating against fossil fuel companies.
BlackRock was on the list of 10 companies tagged as “fossil fuel boycotters” under the SB 13 directive, and state pension systems have been directed to remove their investments from BlackRock and the other entities on the list. It also tweaked its proxy voting policy to allow for more incongruence after the pushback began to pile up.
Whereas BlackRock and State Street will be grilled over how they affect the flow of capital, ISS will likely be questioned over how it advises these pension systems.
Earlier this year, the Employee Retirement System (ERS) voted by proxy in favor of net-zero financing proposals at a handful of company shareholder meetings. Shortly thereafter, the Teachers Retirement System (TRS) voted by proxy for a proposal at Lowe’s annual shareholder meeting to counteract abortion restrictions passed in states like Texas. The pension systems use ISS to advise them on the numerous policy proposals before the many companies in which they have holdings.
ERS said at the time of its proxy vote coming to light, which drew criticism from figures such as Lt. Governor Dan Patrick, that it contacted ISS “to resolve the matter going forward.”
Texas officials and Republicans across the country have zeroed in on this issue. The movement of capital doesn’t only affect numbers on spreadsheets; it directly affects the number of wells drilled or wind turbines built in West Texas, and thus impacts the direction of things as tangible as gasoline prices and the power grid’s electricity generation.
Legislators are already planning to build upon SB 13’s passage when the body reconvenes next year — such as state Rep. Steve Toth’s (R-The Woodlands) plan to prohibit banks and insurance companies operating in Texas from refusing to issue loans or coverage to fossil fuel companies.
What is said by these entities at the hearing tomorrow may inspire even more ideas in legislators for their continued rebuke of ESG in Texas.
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Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.